Invacare 2014 Annual Report Download - page 83

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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installment receivables which were originally financed by the Company because third party financing was not available to the
HME providers. The Canadian installment receivables are typically financed for twelve months and historically have had a very
low risk of default.
The estimated allowance for uncollectible amounts and evaluation for impairment for both classes of installment receivables
is based on the Company’s quarterly review of the financial condition of each individual customer with the allowance for doubtful
accounts adjusted accordingly. Installments are individually and not collectively reviewed for impairment. The Company assesses
the bad debt reserve levels based upon the status of the customer’s adherence to a legally negotiated payment schedule and the
Company’s ability to enforce judgments, liens, etc.
For purposes of granting or extending credit, the Company utilizes a scoring model to generate a composite score that
considers each customer’s consumer credit score and or D&B credit rating, payment history, security collateral and time in business.
Additional analysis is performed for customers desiring credit greater than $250,000 which includes a detailed review of the
customer’s financials as well as consideration of other factors such as exposure to changing reimbursement laws.
Interest income is recognized on installment receivables based on the terms of the installment agreements. Installment
accounts are monitored and if a customer defaults on payments and is moved to collection, interest income is no longer recognized.
Subsequent payments received once an account is put on non-accrual status are generally first applied to the principal balance and
then to the interest. Accruing of interest on collection accounts would only be restarted if the account became current again. All
installment accounts are accounted for using the same methodology regardless of the duration of the installment agreements. When
an account is placed in collection status, the Company goes through a legal process for pursuing collection of outstanding amounts,
the length of which typically approximates eighteen months. Any write-offs are made after the legal process has been completed.
The Company has not made any changes to either its accounting policies or methodology to estimate allowances for doubtful
accounts in the last twelve months.
Installment receivables as of December 31, 2014 and 2013 consist of the following (in thousands):
2014 2013
Current Long-
Term Total Current Long- Term Total
Installment receivables. . . . . . . $ 2,692 $ 5,117 $ 7,809 $ 3,242 $ 5,677 $ 8,919
Less: . . . . . . . . . . . . . . . . . . . . .
Unearned interest . . . . . . . . . . . (46) — (46)(61) — (61)
2,646 5,117 7,763 3,181 5,677 8,858
Allowance for doubtful
accounts . . . . . . . . . . . . . . . . . . (1,592) (4,260) (5,852)(1,619)(4,420)(6,039)
$ 1,054 $ 857 $ 1,911 $ 1,562 $ 1,257 $ 2,819
Installment receivables purchased from DLL during the twelve months ended December 31, 2014 increased the gross
installment receivables balance by $2,123,000 during the year compared to $5,899,000 in 2013. No sales of installment receivables
were made by the Company during the year.
The movement in the installment receivables allowance for doubtful accounts was as follows (in thousands):
2014 2013
Balance as of January 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,039 $ 3,823
Current period provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 3,457
Direct write-offs charged against the allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (983)(1,241)
Balance as of December 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,852 $ 6,039